Turbulence hits UDAN scheme, 50% of routes grounded
Context:
Construction of “74 airports in seven years” as opposed to the same number built in the seven decades after Independence is the government’s major claim to achievement in the aviation industry since 2014. Only 11 of these airports, however, have been completely new construction, and 15 airports have been abandoned during this time due to the failure of nearly half the lines introduced under the regional connectivity plan (RCS).
What is the UDAN scheme?
To improve regional aviation connectivity in India, the Ministry of Civil Aviation launched the Regional Connectivity Scheme ( RCS). The program is sometimes referred to as “UDAN” (Ude Desh Ka Aam Nagrik), which means “Let the Common Citizen of the Country Fly.” Making air travel affordable and readily available for those who reside in India’s rural and remote regions is RCS/UDAN’s main goal. The Regional Connectivity Scheme (RCS)/UDAN’s main characteristics are:
- Aim: The program’s goals include fostering regional economic growth, promoting travel, and enhancing general connectivity to the nation’s rural and underserved regions.
- Subsidized Airfares: As part of the program, certain airlines are permitted to fly between underserved or unserviced airports. Viability Gap Funding is a type of financial assistance given to these airlines to reduce the cost of air travel for people living in these areas.
- Priority Routes: The emphasis is on routes that link smaller cities, villages, and rural areas, which are frequently underserved by air travel.
- Reviving Abandoned Airports: As part of the plan to improve connectivity, unserved or neglected airports will also be reopened.
- Helicopters and Fixed-Wing Aircraft: The program involves both helicopter and fixed-wing aircraft operations to meet various regional connectivity needs.
- Participating Airlines: To expand their operations to underserved regions, regional carriers and currently operating scheduled airlines are both urged to take part in the RCS/UDAN initiative.
- Route Bidding Procedure: Based on the viability gap money that airlines are looking for from the government, airlines are chosen through a competitive bidding procedure. The airline that offers a route with the lowest viability gap finance required wins the route.
- Operational and Financial Flexibility: The program offers some operational flexibility by allowing airlines to run three to seven flights per week on each route, with a minimum.
What is the current status of UDAN?
- Airport Development:
- In the seven years since 2014, according to the government, 74 airports have been constructed.
- Only 11 of these airports were completely new construction; the remainder were historic airstrips that were renovated as part of the RCS program.
- The emphasis was on repurposing underutilized airports and enhancing air connection for smaller cities.
- Regional Connectivity Scheme (RCS) or Ude Desh Ka Aam Nagrik (UDAN) Scheme:
- To increase air connectivity for Tier-2 and Tier-3 cities and to subsidize flights on certain routes, the RCS was introduced in 2017.
- Under this system, airlines bid for routes, and successful airlines receive incentives and viability gap support (subsidy).
- Airlines are required to sell 50% of their tickets at a fixed fee (2,500 per hour of flight) in exchange for a subsidy, which is equal to 50% of the seating capacity of their aircraft.
What are the criticisms and challenges faced by the scheme?
- 225 of the 479 routes that were introduced under the RCS have stopped operating.
- Of these, 128 routes closed before the required three-year timeframe was reached under the plan.
- Airlines discovered that 70 of these 128 routes were not commercially viable even with the subsidies, resulting in their discontinuation.
- Due to airline operators’ non-compliance, airlines’ route surrenders, or airline businesses’ closures, an additional 58 routes were cancelled.
- The RCS program has had varying degrees of success, with certain routes experiencing issues with commercial viability.
- Only 58 out of 155 routes have continued to operate without government subsidies after the initial three years of support.
- The subsidy is paid for by the airlines operating on non-RCS routes through an RCS tax of 15,000 per departure, which they then charge the passengers on non-RCS flights.
- Waterdrome closures:
- Between the Statue of Unity in Kevadia, Gujarat, and Gandhinagar, the state’s capital, two wardrobes were constructed.
- However, they had to shut down quickly after their October 2020 start since SpiceJet stopped operating as a result of “changes in technical requirements.”
What is the way forward from this situation?
- Route Planning and Viability Assessment: Before beginning the launch of new routes under the RCS, do extensive study and viability studies. Examine the routes’ demand, potential passenger flow, and economic viability to make sure they have a higher chance of being financially successful.
- Incentives: Encourage airlines operating on RCS routes to continue operations even after the initial three-year support period by providing further incentives and support. This may take the form of tax breaks, lower operational costs, or cost-related subsidies.
- Public-Private Partnerships: Airport development and management can be done in conjunction with private businesses through public-private partnerships (PPPs). Airport development and operation can benefit from the experience, capital, and efficiency that private firms frequently contribute.
- Participation of Airlines: Promote increased airline participation in the RCS program by offering all airlines appealing benefits and a level playing field for competitiveness. Higher levels of competition may result in better services and more sustainable routes.
- Marketing and Awareness: Promote air travel and the availability of new routes to potential passengers in Tier-2 and Tier-3 cities through marketing and public awareness campaigns. Spread the word about the advantages of flying and work to alter people’s perceptions of its affordability and convenience.
